1st quarterly report shams sep. 2020web: project locations kotla kahloon, district nankana sahib,...

QUARTERLY REPORTSeptember 30, 2020

(Un-Audited)

Q U A R T E R L Y R E P O R T 2 0 2 0

1. Company Information 3

2. Directors’ Report 4-5

3. Condensed Interim Statement of Financial Position 6-7

4. Condensed InterimStatement of Profit or Loss 8

5. Condensed InterimStatement of Comprehensive Income 9

6. Condensed InterimStatement of Cash Flow 10

7. Condensed InterimStatement of Changes in Equity 11

8. Notes to the accounts 12-16

CONTENTS

02

03Q U A R T E R L Y R E P O R T 2 0 2 0

Board of DirectorsMuhammad Anwar (Chairman)Adil BashirAsif BashirKhurram Mazhar KarimMuhammad Shafiq Gill (Nominee: NIT)Shahid ArshadMinail Mishal Adamjee

Chief Executive OfficerKhalid Bashir

Chief Financial OfficerTariq Javed

Company SecretaryMuhammad Haroon Arif

Audit CommitteeShahid Arshad (Chairman)Khurram Mazhar Karim (Member)Asif Bashir (Member)

Human Resource Nomination & Remuneration CommitteeMinail Mishal Adamjee (Chairman)Asif Bashir (Member)Khurram Mazhar Karim (Member)

Share RegistrarCorptec Associates (Pvt) Ltd.503-E, Johar Town, Lahore.

AuditorsRiaz Ahmad & Company Chartered Accountants

BankersMCB Bank LimitedNational Bank of PakistanThe Bank of PunjabUnited Bank Limited

Registered Office7-B-III, Aziz Avenue, Gulberg-V, LahorePh: +92-423-576 0379, 576 0382Fax: +92-423-576 0376Email: [email protected] Web: www.shams.com.pk

Project LocationsKotla Kahloon, District Nankana Sahib, Punjab3-KM, Faisalabad Road, Chiniot, Punjab

COMPANY INFORMATION


The Board of Directors is pleased to present Directors' report on the operation and financial performance of the Company for the period July 2020 to September 2020.

Despite efforts on the part of the management, your Company continues to struggle. The Textile Industry in Pakistan is not showing any signs of a significant recovery. Our basic raw material is not available to us in quality and quantity. The cotton crop has been extensively damaged and the target of production is likely to be missed by a large margin. Add to this the quality this year has been lower as compared to previous years which is alarming.

Financially the Company has not achieved its budgeted targets. Our cost of doing business remains higher and we are facing stiff competition from our competitors.

Unfortunately we are not able to project a positive outlook for the current year. Based on currents factors no significant recovery can be foreseen.

We would like to thank the Board of Directors for their guidance at all times and to all employees and shareholders for their cooperation.

Financial summary of the current quarter is as follow:

Rs. in million 30 September 30 September2020 2019

Sales 1,332.53 847.08Gross profit 81.19 51.62Operating expenses 36.47 27.95Other income 2.38 1.09Profit from operation 47.10 24.76Finance cost 15.28 12.26Profit before taxation 31.82 12.49Provision for taxation 19.25 11.91

Profit after taxation 12.57 0.58

Profit per share (Rs.) 1.45 0.07

Future Outlook:

Acknowledgment:

For and On behalf of Board of Directors

Khalid Bashir Asif BashirChief Executive Director

October 27, 2020Lahore

DIRECTORS’ REPORT

04


1,332.53

81.19

36.47

2.38

47.10

15.28

31.82

19.25

12.57

1.45

847.08

51.62

27.95

1.09

24.76

12.26

12.49

11.91

0.58

0.07

2720

20

2020


CONDENSED INTERIM STATEMENT OF FINANCIAL POSITIONAs At September 30, 2020

Un Audited Audited

September June30, 2020 30, 2020

Note (Rupees in thousands)

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

Authorized share capital

25,000,000 (30 June 2020: 25,000,000)ordinary shares of Rupees 10 each 250,000 250,000

Issued, subscribed and paid-up share capital

8,640,000 (30 June 2020: 8,640,000) ordinaryshares of Rupees 10 each 86,400 86,400

Reserves 455,524 447,216

Total equity 541,924 533,616

LIABILITIES

NON-CURRENT LIABILITIES

Long term financing 5 10,769 14,036

CURRENT LIABILITIES

Trade and other payables 972,971 839,599Accrued mark-up 7,406 5,559Short term borrowings 543,241 324,420Current portion of long term financing 6 5,517 2,250Unclaimed dividend 4,335 4,424

1,533,470 1,176,252

Total liabilities 1,544,239 1,190,288

CONTINGENCIES AND COMMITMENTS 7 - -

TOTAL EQUITY AND LIABILITIES 2,086,163 1,723,904

The annexed notes form an integral part of this condensed interim financial information.

Chief Executive Chief Financial Officer Director

06


Un Audited Audited



ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 8 766,139 780,355Long term investments 41,883 46,144Long term deposits 1,576 1,576

809,598 828,075

CURRENT ASSETS

Stores, spare parts and loose tools 56,636 63,053Stock-in-trade 616,581 634,399Trade debts 510,922 94,477Advances 6,841 11,949Short term prepayments 5,319 -Other receivable 23,370 24,060Sales tax refundable 25,721 25,721Taxation - net 22,448 35,096Cash and bank balances 8,727 7,074

1,276,565 895,829

TOTAL ASSETS 2,086,163 1,723,904


07


CONDENSED INTERIM STATEMENT OF PROFIT OR LOSS (Un-Audited)For The Period Ended September 30, 2020

September September30, 2020 30, 2019


REVENUE 9 1,332,528 847,075

COST OF SALES 10 (1,251,341) (795,453)

GROSS PROFIT 81,187 51,622

DISTRIBUTION COST (15,403) (7,330)

ADMINISTRATIVE EXPENSES (19,284) (19,602)

OTHER EXPENSES (1,781) (1,023)

(36,468) (27,955)

44,719 23,667

OTHER INCOME 2,377 1,091

PROFIT FROM OPERATIONS 47,096 24,758

FINANCE COST (15,279) (12,262)

PROFIT BEFORE TAXATION 31,817 12,496

TAXATION (19,249) (11,914)

PROFIT AFTER TAXATION 12,568 582

EARNINGS PER SHARE - BASIC AND DILUTED (RUPEES) 1.45 0.07

The annexed notes form an integral part of these financial statements.


08


CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (Un-audited)For The Period Ended September 30, 2020

September September

30, 2020 30, 2019

(Rupees in thousands)

PROFIT AFTER TAXATION 12,568 582

OTHER COMPREHENSIVE (LOSS)

Items that may be reclassified subsequently to profit or loss:

Deficit arising on remeasurement of available for sale investments to fair value (4,260) (1,793)

Other comprehensive loss for the period (4,260) (1,793)

TOTAL COMPREHENSIVE PROFIT / (LOSS)FOR THE PERIOD 8,308 (1,211)

The annexed notes form an integral part of these financial statements.



CONDENSED INTERIM STATEMENT OF CASH FLOW (Un-Audited)For The Period Ended September 30, 2020

September September

30, 2020 30, 2019


CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated (used in) / from operations 11 (194,699) (310,689)

Finance cost paid (6,601) (6,994)

Income tax paid (13,433) (17,148)

Dividend paid (89) (16)

Net cash generated (used in) operating activities (214,822) (334,847)

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditure on property, plant and equipment (2,436) (440)

Dividend received 90 90

Net cash (used in) / from investing activities (2,346) (350)

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of long term financing - (3,267)

Short term borrowings - net 218,821 314,391

Net cash from financing activities 218,821 311,124

Net increase / (decrease) in cash and cash equivalents 1,653 (24,073)

Cash and cash equivalents at the beginning of the period 7,074 27,298

Cash and cash equivalents at the end of the period 8,727 3,225

The annexed notes form an integral part of this condensed interim financial information.



CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (Un-Audited)For The Period Ended September 30, 2020

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SELECTED NOTES TO THE CONDENSED INTERIMFINANCIAL INFORMATION (Un-Audited)For The Period Ended September 30, 2020

1. THE COMPANY AND ITS OPERATIONS

Shams Textile Mills Limited is a public limited company incorporated in Pakistan under the Companies Act, 1913 (Now Companies Act, 2017) and is listed on Pakistan Stock Exchange Limited. Its registered office is situated at 7-B-III, Aziz Avenue, Gulberg V, Lahore. The company is engaged in the business of manufacturing, sale of yarn.

2. BASIS OF PREPARATION

This condensed interim financial information has been prepared in accordance with the accounting and reporting standards as applicable in Pakistan for interim financial reporting. The accounting and reporting standards as applicable in Pakistan for interim financial reporting comprise of:

• International Accounting Standard (IAS) 34, Interim Financial Reporting, issued by the International Accounting Standards Board (IASB) as notified under the Companies Act, 2017; and

• Provisions of and directives issued under the Companies Act, 2017.

Where the provisions of and directives issued under the Companies Act, 2017 differ with the requirements of IAS 34, the provisions of and directives issued under the Companies Act, 2017 have been followed.

This condensed interim financial information do not include all the information and disclosures required in annual financial statements and should be read in conjunction with the annual audited financial statements of the Company for the year ended 30 June 2018. These condensed interim financial statements are un-audited and are being submitted to the shareholders as required by Section 237 of the Companies Act, 2017.

3. ACCOUNTING POLICIES

The accounting policies and methods of computation adopted in the preparation of this condensed interim financial information are the same as those applied in the preparation of the preceding audited annual published financial statements of the company for the year ended 30 June 2020.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of this condensed interim financial information in conformity with the approved accounting standards requires the use of certain critical accounting estimates. It also requires the management to exercise its judgment in the process of applying the company's accounting policies. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

During preparation of this condensed interim financial information, the significant judgments made by the management in applying the company’s accounting policies and the key sources of estimation and uncertainty were the same as those that applied in the preceding audited annual published financial statements of the company for the year ended 30 June 2020.

Unaudited Audited



5. LONG TERM FINANCING - SECURED

Opening balance 16,286 27,103Less: Repayments during the period / year - 10,817

16,286 16,286

6. Less: Current portion shown under current liabilities 5,517 2,250

10,769 14,036

12



7. CONTINGENCIES AND COMMITMENTS

Contingencies

Bank guarantees of Rupees 69.596 million (30 June 2020: Rupees 69.596 million) are given by the bank of the company in favour of Sui Northern Gas Pipelines Limited against gas connections.

Commitments

Letters of credit for other than capital expenditures amounted to Rupees 40.886 million (30 June 2020: Rupees 218.812 million).

Un-audited Audited



8. PROPERTY, PLANT AND EQUIPMENT

Operating fixed assets

Owned (Note 8.1) 766,139 780,355 Capital work-in-progress (Note 8.2) - -

766,139 780,355

8.1 Operating fixed assets - owned

Opening book value 780,355 817,790Add: Cost of additions during the period / year (Note 8.1.1) 2,436 34,291

782,791 852,081

Less: Book value of deletions during the period / year (Note 8.1.2) - 501

782,791 851,580

Less: Depreciation charged during the period / year 16,654 71,225

Closing book value 766,139 780,355

8.1.1 Cost of additions

Plant and machinery 2,436 31,737

Vehicles - 2,554

2,436 34,291

8.1.2 Book value of deletions

Plant and machinery - 501

- 501

Unaudited Unaudited



9. REVENUE

Export 147,746 158,345Local 1,184,782 688,730

1,332,528 847,075



Unaudited Unaudited



10. COST OF SALES

Raw material consumed 998,358 1,057,599Stores, spares and loose tools consumed 30,907 30,011Packing materials 20,229 19,480Salaries, wages and other benefits 100,377 107,536Fuel and power 136,544 152,838Repairs and maintenance 3,153 2,282Insurance 1,393 1,381Depreciation 1,098 1,849Other factory overheads 15,292 15,956

1,307,351 1,388,932

Work-in-process:

Opening stock 44,886 49,915Closing stock (34,930) (37,052)

9,956 12,863

Cost of goods manufactured 1,317,307 1,401,795

Finished goods:

Opening stock 416,975 256,654Closing stock (482,941) (862,996)

(65,966) (606,342)

1,251,341 795,453

11. CASH GENERATED FROM OPERATIONS

Profit before taxation 31,817 12,496

Adjustments for non-cash charges and other items:

Depreciation 16,654 17,453Dividend received (90) (90)Gain on sale of property, plant and equipment - -Finance cost 15,279 12,262Working capital changes (Note 11.1) (258,359) (352,810)

(194,699) (310,689)

11.1 Working capital changes

(Increase) / decrease in current assets:- Stores, spare parts and loose tools 6,417 1,751- Stock-in-trade 17,818 (524,340)- Trade debts (416,445) 40,235- Loans and advances 5,108 13,666- Trade deposit and short term prepayments (5,319) (4,537)- Other receivables 690 (90)

(391,731) (473,315)

Decrease in trade and other payables 133,372 120,505

(258,359) (352,810)

14



12. RECOGNIZED FAIR VALUE MEASUREMENTS - FINANCIAL STATEMENTS

(i) Fair value hierarchy

Judgements and estimates are made in determining the fair values of the financial instruments that are recognised and measured at fair value in this condensed interim financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the following three levels. An explanation of each level follows underneath the table.

Recurring fair value measurements Level 1 Level 2 Level 3 TotalAt 30 September 2020

Rupees in thousand

Financial assets

At fair value through other comprehensive income assets 41,483 - - 41,483

Total financial assets 41,483 - - 41,483

Recurring fair value measurements Level 1 Level 2 Level 3 TotalAt 30 June 2019

Rupees in thousand

Financial assets

At fair value through othercomprehensive income assets 46,144 - - 64,323

Total financial assets 46,144 - - 64,323

The above table does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amounts are a reasonable approximation of fair value. Due to short term nature, carrying amounts of certain financial assets and financial liabilities are considered to be the same as their fair value. For the majority of the non-current receivables, the fair values are also not significantly different to their carrying amounts.

There were no transfers between levels 1 and 2 for recurring fair value measurements during the year. Further there was no transfer in and out of level 3 measurements.

The Company’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

Level 1: The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Company is the current bid price. These instruments are included in level 1.

Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities.

ii. Valuation techniques used to determine fair values

Specific valuation technique used to value financial instruments was use of quoted market prices.

15



16

13.TRANSACTION WITH RELATED PARTIES

The related parties comprise associated undertakings, key management personnel and provident fund trust. The company in the normal course of business carries out transactions with various related parties. Detail of transactions with related parties are as follows:

Un-audited Un-audited



Associated Companies

Sale of goods and services 7,646 61,727

Purchase of goods and services 2,429 112

Insurance premium 3,069 7,147

Rent expense 600 600

Other related parties

Company's contribution to employees' provident fund trust 1,822 1,542

14. FINANCIAL RISK MANAGEMENT

The company's financial risk management objectives and policies are consistent with those disclosed in the preceding audited annual published financial statements of the company for the year ended 30 June 2020

15. DATE OF AUTHORIZATION FOR ISSUE

This condensed interim financial information was approved by the Board of Directors of the company and authorized for issue on October 27, 2020.

16. CORRESPONDING FIGURES

Corresponding figures have been re-arranged, wherever necessary, for the purpose of comparison, however, no significant re-arrangements have been made.

17. GENERAL

Figures have been rounded off to the nearest thousand of Rupees unless otherwise stated.


BOOK POST

Shams Textile Mills Limited

7-B-3, Aziz Avenue, Gulberg 5

Lahore Pakistan

T: 92 (42) 3576 0381

F: 92 (42) 3576 0376

E: [email protected]

www.shams.com.pk Gra

ce

Prin

t N

Pa

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Pvt

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4-4

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1st quarterly report shams sep. 2020web: project locations kotla kahloon, district nankana sahib,...

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